5 Automotive Supply Chain Challenges Facing the Industry

The automotive supply chain has long been one of the most complex in the world, and is now responsible for the employment of as many as 78,000 individuals in the UK alone.1 As globalisation continues to drive change in the sector, with global automakers outsourcing 30-60% of their parts to China, vulnerabilities and complexity are likely to increase.2 

Brexit has paired with the challenges posed by COVID-19 to highlight existing issues and create new obstacles. The closure of China’s automotive industry at the start of the pandemic was especially problematic, leading to as many as 1.7 million missing automotive parts.3 Meanwhile, tariffs and regulatory changes caused by Brexit are creating further operational concerns. 

In this article, we’re going to consider the most pressing challenges currently facing automotive supply chains. Let’s get started. 

1. A lack of visibility

On average, vehicles consist of 30,000 components, and rely on supply chains that come together as and when production requires.4 As a result, blind spots at any stage can have significant knock-on effects for the entire procurement process, often in the shape of inventory shortages, and sometimes significant delays. 

It’s hardly surprising, then, that 81% of the automotive industry is concerned about visibility, compared with 70% in other sectors.5 This is due in part to the industry’s ‘just-in-time’ operations, which mean one mistake or lack of oversight can create a ripple effect of disruption.

With this in mind, parties across supply chains will need to increase focus on: 

  • Central views of all communications
  • Tracking all parts at any stage of their supply journey
  • Streamlined processes across entire supply chains
  • Predictive analytics, and the ability to communicate findings in real-time

2. Productive partnerships

Extensive, global supply chains are powering the automotive industry, but long distances also leave productive partnerships at significant risk. Inefficient communications across varying standards, protocols, and software are especially problematic, rendering even platforms that aim to address this problem obsolete. 

Worse, lacking transparency due to these operational issues can lead to misunderstandings that either prevent the true benefits of partnerships from being felt or, in some cases, spell the end for trade relationships altogether.

Supplier relationship management (SRM) that centres around openness, trust, and communication plays a key role in smoothing these concerns. That said, the need for seamless communication means that SRM has to utilise software that enables real-time communications that long-distance partners can access and interact with. 

3. Environmental concerns

Environmental concerns have been at the top of the automotive agenda since Volkswagen’s ‘diesel dupe’ back in 2015.6 These focuses have sped into the fast lane as consumer concerns, and increasingly strict emissions regulations, mean that green initiatives are not only expected but imperative for manufacturers and respective partners.7 

Emissions declines as high as 7%8 across lockdowns, and electric vehicle (EV) registrations that surged by 185%9 during that same period, have created a landscape where the industry must prioritise these concerns. 

This is true in the short term in regards to existing partners, and in the long term, which will require onboarding of new suppliers that make EVs a reality and put emissions regulations into practice. 

Unfortunately, location-based differences, alongside complex onboarding, mean that these improvements are easier said than done. Existing third-party logistics partners are especially at risk of failing to realise regional environmental focuses unless specific efforts, and software, are put in place to communicate and draw attention to them.

4. The impact of Covid-19

30-50% decreases in automotive spending were just the tip of the pandemic iceberg for the industry.10 Disruptions have led to chip shortages that facilitated 40% output cuts at industry leaders like Volkswagen and Toyota.11 

This lasting impact on the supply of raw materials highlights the volatilities inherent with global supply chains that, moving forward, need to focus on resilience in the face of unexpected challenges. 

Unfortunately, this expectation comes at a time when the costs of the pandemic are still being felt, leading many manufacturers to overlook long-term trajectories in a still-uncertain present. Even moving into a so-called post-pandemic ‘new normal’ will be difficult until a longer-term view is finally taken with regards to resilience. 

Improved communication can help to highlight upcoming supply shortages in the future. However, without flexible processes and continuity plans to overcome them, these warnings will be next to useless. Hence, supply chains also need to prioritise the specific implementation of resilience processes, including:

  • Monitoring and alerts for real-time supply issues
  • Simplified access to supply data and communications
  • Flexible, fast onboarding where necessary
  • Trusting, communication-driven, supplier relationships

5. Increasing bureaucracy 

Brexit-based overhauls have convoluted already complex European automotive supply. Difficult-to-navigate customs bureaucracy has led to longer journey times, added risks of delay, and general inefficiency. Together, these issues are making Europe’s once-booming automotive sector less appealing for prospective international trade and investment. 

Predictions that industry-saving regulatory compliance is still a long way off work with these setbacks to highlight the need for individual manufacturers to find a way through increasingly lengthy red tape. Avoiding potential delays and resulting cost increases as high as 1.0-2.5%12 is especially reliant on an optimised auto supply chain strategy that operates around:

  • Faster, flexible onboarding of new, compliant suppliers
  • Immediate communication of regulatory developments
  • Visibility across delayed or lost parts

This way, even as industry-wide gaps emerge, manufacturers can better enable inter-partner regulatory compliance that keeps the wheels turning, and ensures manageable hurdles that are foreseen, shared, and integrated into processes.

Building resilient and productive supply chains

Disparate automotive supply chain challenges circle back to the need for efficient, streamlined processes and communications. Since the 1960s, electronic data interchange (EDI) has facilitated the automated exchange of information across global automotive supply chains.

Unfortunately, convoluted onboarding processes and numerous different protocols have meant that legacy EDI solutions have struggled to deliver the levels of resilience and productivity needed in modern supply chains. 

At Data Interchange, we have decades of experience helping businesses implement effective EDI systems. Now, looking to the future of automotive supply chains, we’ve developed a modern form of EDI that we like to call EDI-as-a-Service

This hybrid approach to EDI utilises managed services and cloud-based tools to meet the complexities of global supply chains. Businesses within the automotive industry that make the transition to EDI-as-a-Service can access a range of benefits that can assist in overcoming the industry-specific challenges detailed above. These include:

  • Increased flexibility: The accommodation of various protocols and standards enables swift, agile onboarding, thereby allowing a range of supplier familiarity with EDI.
  • Enhanced visibility: Dashboards and cloud-based tools make EDI-as-a-Service equipped to provide a one-source focus to supply chain digitisation.
  • Simplicity: Smooth supply chain integration processes remove unnecessary complexity, whilst cloud-based EDI facilitates access across the supply chain.
  • Greater control and planning capabilities: Each of the above contributes to businesses’ ability to plan and control the supply chain, allowing more resilient and productive processes to be put in place.       

If you’re looking to overcome automotive supply chain challenges and gain a competitive edge for your businesses in the process, get in touch today.

Suggested reading: To learn more about EDI-as-a-Service, check out our blog — How EDI-as-a-Service Changes Supply Chain Best Practices in 2021


12021 Automotive Sustainability Report
2Opinion: Covid-19 impact on global auto industry – Need for more resilient supply chains
3Coronavirus damages China’s auto industry as outbreak worsens
4Top 4 Automotive Supply Chain Challenges and Solutions
5Smart Solution for Supply Chain Challenges in Automotive Industry
6Volkswagen: The scandal explained
7CO₂ emission performance standards for cars and vans
8Climate change: Covid drives record emissions drop in 2020
9UK EV registrations up 185% in 2020, despite impact of Covid-19
10Global Auto Production in 2020 Severely Hit By COVID-19 Crisis With a 16% Drop in World Auto Production
11Volkswagen and Toyota face production cuts due to chip shortage
12Car price increases still likely with post-Brexit trade deal

Transform your approach to supply chain management

Talk to an Expert








    Epicor values your privacy. Website terms and conditions.

    RELATED ARTICLES

    The EDIFACT DELJIT T-Set: Structure, Benefits & Use Cases

    The EDIFACT DELFOR T-Set: Structure, Benefits & Use Cases

    The VDA 4915 Message Explained

    The VDA 4905 Message Explained

    T-Sets | ANSI X12 810

    How to optimise your EDI and ERP system integration

    T-Sets | ANSI X12 997

    T-Set | EDIFACT INVOIC

    T-Set | EDIFACT DESADV

    Exploring Cloud EDI Services in ERP: Architecture, Security, and Scalability

    VDA Explained: Message Standards and Transaction Sets

    ANSI X12 Explained: Message Standards and Transaction Sets

    EDIFACT Explained: Message Standards and Transaction Sets

    The Power of Web EDI for Global Supply Chains

    How to Get the Most Out of AS2

    How EDI Simplifies Transactions in the Manufacturing Sector

    Why Your Automotive Supply Chain Needs an OFTP2 Connection

    Digital Supply Chain Trends Impacting 2023 and Beyond

    How to Manage Global Supply Chain Complexities

    How to Overcome Supply Chain Risk

    What is the Future of Supply Chain Management in 2023?

    How to Improve your Supply Chain Strategy

    Why Scalable EDI is Integral to Rapid Business Growth

    How to Pick the Right EDI File Transfer Protocol

    An Introduction to OFTP2 (Odette File Transfer Protocol)

    What are the Costs of EDI Implementation?

    What is PEPPOL?

    A Guide to EDI Protocols

    EDI VAN Costs: Get the Right Solution for your Business

    How Much Does EDI Cost?

    How Do On-Premise EDI Solutions Work?

    Our Plan at Data Interchange to Change EDI and Supply Chain Management

    Integrating EDI with your ERP

    In-house vs Managed Service EDI

    What is an API Integration? And how does it affect EDI?

    Epicor Acquires EDI Provider Data Interchange

    6 Benefits of EDI in the Logistics Industry

    4 Challenges Facing the Logistics Industry and How to Overcome Them

    Top EDI Solution Providers in 2023

    Solving Supply Chain Problems in the Logistics Industry

    B2B EDI Integration Best Practices in 2023

    How to Choose The Right EDI Provider in 2022

    Supply Chain Analytics Trends in 2022

    Future-proof your business: Take Advantage of Market Growth

    Announcement: Andrew Filby becomes CEO of Data Interchange

    7 Advantages of EDI in The Automotive Industry

    Consumer Expectations cause Demand for Integrated Data

    How to Optimise Your Automotive Supply Chain Processes

    Post-Pandemic Supply Chain Challenges Increase the Pressure

    EDI Made Simple for the Automotive Industry

    Overcoming Supply Chain Visibility Issues in the Automotive Industry

    Complex Supply Chain Problems and Simple Solutions

    Supply Chain Flexibility: Why your customers need it

    Supplier Performance Management Reimagined in 2023

    How to Unite Emerging Supply Chain Management Technology Trends

    Meet the Team: Marketing

    Supplier Management Best Practices after COVID-19

    The Future of EDI: Looking Beyond 2025

    The top three supply chain data exchange requirements

    The Advantages of EDI in E-Commerce: How to Gain a Competitive Advantage Online in 2021

    A Crash Course on EDI Industry Standards: ANSI x12 vs EDIFACT vs OFTP and more

    What is EDI Mapping?

    What is EDI: The History and Future of Electronic Data Interchange

    The Future of the Automotive Supply Chain

    Supplier Relationship Management: How to reduce risk and improve performance

    How EDI-as-a-Service Changes Supply Chain Best Practices in 2021

    Agile Supplier Onboarding: Supply Chain Security in Uncertain Times

    The impact of failed EDI on Supply Chain

    Cloud-Based EDI Solutions vs On-Premise

    Different Types of EDI Compared

    5 Most Common EDI Implementation Issues and How to Solve Them

    Are your EDI documents ready for the new EU/UK customs border?

    B2B Integration Challenges

    EDI vs API: Bridge the B2B connectivity gap

    Ten things to look for in an EDI Managed Service Provider

    World Mental Health Day 2020

    Logicalis & Data Interchange – partnering for success

    EDI – A data integration service critical to business success

    Joining forces with SnapLogic: bringing together market leading iPaaS and EDI solutions

    Joining Data Interchange: My lockdown experience

    Data Interchange announces strategic partnership with SmarterPay

    Access new trading partners quickly for COVID-19 support

    Keeping supply chains moving

    Our Web EDI solution gets a makeover

    Coronavirus: Our Business Continuity Plan

    With love from Data Interchange ♥

    A new decade, renewed ambition and the next generation

    Brexit and EDI

    Data Interchange transform their Support service for an improved customer experience

    Interview: An update on Data Interchange’s new CEO, Robert Steiner

    Data Interchange appoints Robert Steiner as new CEO

    MQ messages over ENX – Renault

    Five key questions for your EDI provider

    Data Interchange at the Odette Conference 2018

    How to select the right EDI provider

    Future proof your EDI and unleash growth

    EDI: the Supply chain performance enhancer

    Taking cost out of the chain

    Non-EDI users held up in the mail

    Over 41% of companies at risk without EDI

    ​Consolidating VAN providers

    Increase visibility and productivity of supply chain logistics with Data Interchange’s B2B integration solutions

    Data Interchange wins large business of the year award

    Data Interchange launch new Support Portal

    Data Interchange will be showcasing our EDI solution offerings and promoting the benefits of MMOG/LE

    Metaldyne receive special recognition from Ford for 11th consecutive year

    Making the move to cloud based EDI Solutions

    Top 5 reasons to switch to EDI Managed Services

    Data Interchange to power QAD Managed EDI On Demand